Wall Street sinks deeper into the red as investors take advantage of the 2024 U.S. dollar rally and yields fall as Treasuries are boosted by risk aversion. Mixed Chinese PMIs fail to provide much direction.
Stock market rally turns into year-end sell-off
After a record year for Wall Street, there was no Santa Claus rally to cap off 2024, with the US election campaign grinding to a halt in early December. Given the magnitude of last year’s rally, which was primarily driven by Magnificent 7 and AI-related stocks, some year-end profit-taking is not only expected, but reasonable considering given all the uncertainties that await us in 2025.
Euphoria over Fed rate cuts and Trump’s business-friendly policies, which dominated the market theme in November, quickly turned to caution. The Fed may have cut interest rates by a full percentage point in 2024, but the overriding message from its final policy decision of the year was that it would likely pause in early 2025 as traders considered May as the earliest possible meeting for a 25-basis point rate cut.
Investors have also turned sour on Trump in recent weeks, amid a big question mark over how far he will take his tariff war with the United States’ major trading partners. Additionally, as markets become reacquainted with Trump’s chaotic leadership style since his re-election, further gains in stocks are unlikely until it becomes clearer what tax and policy policies will look like. tariffs of the new administration.
A strong year for stocks
How earnings expectations evolve over the coming months will also be crucial for Wall Street, particularly for tech and AI stocks. The index is the only one of the major U.S. indexes to have retained some of its monthly gains, while both the index and the index are on track to end December in the red.
However, the Nasdaq and the S&P 500 are heading for gains of around 25% for the year and even the European indices, clouded by economic gloom and political uncertainty, can boast solid increases, with the exception of France.
In Asia, Japan topped the list, helped largely by the decline in , while Chinese indices got a…
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